Nittetsu Mining's (TSE:1515) Weak Earnings May Only Reveal A Part Of The Whole Picture

Investors were disappointed by Nittetsu Mining Co., Ltd.'s (TSE:1515 ) latest earnings release. Our analysis has found some reasons to be concerned, beyond the weak headline numbers.

See our latest analysis for Nittetsu Mining

The Impact Of Unusual Items On Profit

For anyone who wants to understand Nittetsu Mining's profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit gained from JP¥1.8b worth of unusual items. While it's always nice to have higher profit, a large contribution from unusual items sometimes dampens our enthusiasm. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If Nittetsu Mining doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Nittetsu Mining.

Our Take On Nittetsu Mining's Profit Performance

Arguably, Nittetsu Mining's statutory earnings have been distorted by unusual items boosting profit. Because of this, we think that it may be that Nittetsu Mining's statutory profits are better than its underlying earnings power. But at least holders can take some solace from the 26% per annum growth in EPS for the last three. At the end of the day, it's essential to consider more than just the factors above, if you want to understand the company properly. So while earnings quality is important, it's equally important to consider the risks facing Nittetsu Mining at this point in time. At Simply Wall St, we found 1 warning sign for Nittetsu Mining and we think they deserve your attention.

Today we've zoomed in on a single data point to better understand the nature of Nittetsu Mining's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.